Case Law Details
Brief of the Case
ITAT Amritsar held In the case of M/s Aaren Exports vs. DCIT that a Keyman insurance policy is to enable business organizations to insure the life of a Keyman in order to protect the business against the financial loss which may occur in the likely eventuality of premature death. Such expenditure is treated as business expenditure by the Department itself and recognized as such in Circular dated 18.2.1998. The expenditure is to be seen at the time it is incurred. Merely because the policy was assigned after sometime would not mean that the expenditure incurred in the first instance would lose the entitlement of it being business expenditure.
Facts of the Case
The assessee is a manufacturer and exporter of garden tools, hand tools etc. and is also trading in certain items like PVC resin etc. The case of the assessee was selected for scrutiny. During the assessment proceedings, the A.O required the assessee to produce stock register which the assessee stated that in view of the number of items involved as raw material in the manufacturing process, it was not possible to maintain the stock register. The assessee was then required to furnish the breakup of finished goods, semi finished goods, and consumable stores and was also required to submit the basis of valuation of stocks. In the course of said verification and examination of books of account vis-à-vis bills produced of various items of raw material, the Assessing Officer observed a number of discrepancies in the quantity and valuation thereof.
The Assessing Officer further compared gross profit ratio declared by assessee in previous three years by excluding export incentives. From the analysis the Assessing Officer observed that assessee had in fact declared lower Gross Profit as compared to earlier years. Keeping in view all the facts and circumstances the books of account of assessee were rejected and addition of Rs.25.40 lac was made to the Gross Profit of assessee.
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